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Morning markets: investor pullback dents crops

Markets29 Jul 2009by Newsdesk

Chicago crops succumbed to gravity affecting a range of financial markets on Wednesday, as concerns that economic revival hopes had got ahead of themselves prompted many investors to draw in their horns.

Soybeans, in particular, had got off to a good start, even as the minutes ticked away to Beijing's latest auction of some its own massive bean inventories.

Traders have taken news that China is keeping the terms of Wednesday's sale the same as last week's as a good sign.

The prospect of another wash-out auction - the first round attracted no buyers because of high auction prices – means crushers will remain in the market for beans from elsewhere, while there are no signs yet that Beijing's own appetite for foreign soybeans is dimming.

'Risk premium'

Meanwhile, concerns are growing that the tardiness of the US crop will leave it open to late season weather risks – notably frost.

"Soybeans are rebuilding a bit of risk premium," a London trader told Agrimoney.com.

"The condition of crops looks good so far, but can they hold on to it?"

Widespread weakness

Still, soybeans' immediate problem was holding on to early gains, with Chicago's August contract dropping from a higher of nearly $10.60 a bushel to $10.47 ¼ a bushel at 06:30 GMT, down 6.75 cents on the day.

Corn was dragged lower too, down 1 cent at $3.19 ½ a bushel for September delivery, while wheat for the same month slid 1.25 cents to $5.15 a bushel.

Investor sentiment on many markets has been soured by disappointing data for US consumer confidence and some mixed corporate results - with headway based more on cost cuts rather than revenue rises - leaving a question mark over demand, a big factor for commodities.

Indeed, oil slumped 1.9% to $65.93 a barrel for New York's September light crude contract.

Shares were faring badly as well. While Tokyo stocks managed a small gain on Wednesday, the rest of Asia was looking pretty poorly. Taiwan shares had their worst day in two weeks, Mumbai's market was 2% lower in midday trade, while Chinese equities slumped 6%.

Export hopes

In Kuala Lumpur, meanwhile, palm oil prices followed the same pattern, rising to 2,158 ringgit a tonne in early deals before falling back to 2,140 ringgit per tonne by midday.

The early rise was supported by data from Oil World, the German analysis group, that global palm oil exports could reach 35.2m tonnes in the 2008-09 marketing year, which ends in September, up 7% year on year.